Although we are not related, we think just like brothers, and we agree about gold and the future of the dollar, 100% .  Are you still not convinced that you need at least some gold or silver exposure in your overall portfolio?  Up another $20 today already.  If not, you’re missing out indeed….

1)      As the world looks to “reflate” their economies, fiat currencies (dollar, euro etc) are being deliberately devalued by governments worldwide as a way to get out from massive debt burdens that were run up during “credit bubble” and continue at ever higher levels with “stimulus” plans. The US very much wants and needs a weaker dollar and low interest rates as deficits and unemployment continue to soar. Fiat currencies will likely continue to be aggressively devalued over the next decade.

2)      China has $2 Trillion in Foreign Currency reserves (Fiat Currency) and only 2% in gold, vs. 75% for US and 10% worldwide average. With every .5% drop in the dollar, drops the value of China foreign currency reserves by $10 billion dollars (a move happening daily recently). If China wisely decides to increase its gold reserves and reduce it fiat currency exposure to even just the worldwide average, gold prices could move substantially higher and stay at higher price levels.

3)      Scarcity Part One: The gold industry has not replaced gold reserves mined in over a decade, gold is simply too scarce.  Scarcity means shortages on the near term horizon. Shortages in gold means there is not enough physical gold available to cover the massive quantities of gold that has been “lent”, “leased” or “pledged”.  This situation will only be exasperated going forward opening the real possibility of a major gold short squeeze and possible price spike pushing gold to the stratosphere (and keeping it there).

4)      Scarcity Part Two: Throughout history only 160,000 tons of gold has ever been mined.  At today’s prices that equates to $4.9 trillion dollars vs $60 trillion in outstanding fiat currency. As fiat currency continues to be deliberately debased look for this price relationship to invert.

5)      Scarcity Part Three: Repatriation.  Hong Kong recently pulled all its gold holdings and deposits from London.Hong Kong wants to physically possess and control its gold and now does. Look for other countries to follow.

6)      Deep Pockets Part One: Central banks, the deepest pockets of them all,  are in the process of switching from net sellers of gold to net buyers, this is a major secular change and is likely to continue as other central banks look to follow suit diversify reserves away from heavy fiat currency exposure.

7)      Deep Pockets Part Two: Major insurance companies have begun purchasing gold.  Northwestern Mutual, considered a conservatively run yet savvy company, recently purchased $400 million worth of gold, its first purchase in 152 years, its CEO Edward Zore believes gold could increase five fold. Look for other insurance companies to follow.

8)      Deep Pockets Part Three:  Sovereign wealth funds, China, Qatar, and Saudi Arabia have begun heavily investing in commodities world-wide to diversify out of Fiat Currency (dollar, euro). Look for more SWF to follow.

9)      Deep Pockets Part Four: Respected and  widely followed fund managers are publicly piling into gold and/or out of the dollar including John Paulson, Bill Gross, Paul Tudor Jones, Kyle Bass, David Einhorn, Paolo Pellegrini, John Burbank, Sri Kumar, David Rosenberg (economist,) John Hasenstab, Evy Hambro, Donald Coxe, John Brynjolfsson and David Tice. Look for other major mutual funds, hedge funds and pension funds to follow the leaders.

10)  Traditional Gold hedgers (producers, miners etc)  such as Barrick, the  world’s largest gold company, are eliminating their hedge books…essentially taking the cap of the market…as gold supplies dry up producers are no longer locking in prices by selling massive quantities of futures contracts…this takes selling pressure off and indicates producers believe prices will be going much higher. Look for all producers to unwind their hedge books.

The world is changing rapidly. Old world powers, like the US, are making room on the stage for new world powers like China. Previous deep pockets are being displaced by new even deeper pockets: Central Banks. All of the above indicates much higher prices to come. The first movers in all the categories above (central banks, insurance companies, funds, sovereign wealth funds) will have the advantage of getting in at lower prices. Late movers will be forced to buy at higher prices.  Regardless of who does what we are going higher.

Recommendation: If you do one trade in the next two years do this: Get long and stay long gold.